What is a Self-Managed Super Fund used for?
A Self-Managed Superannuation Fund (SMSF) is the same as a public offer or industry superannuation fund in that its purpose is to financially provide for the retirement of its members. However, an SMSF provides a much greater level of control over the investment of the trust fund and can deliver potential cost savings if the members of the SMSF become actively engaged in the management of their own super.
An SMSF may have from 1 to 6 members. If you need to establish a superannuation fund with more than 6 members, the options are:
- establish more than one SMSFs, or
- establish a Small APRA Fund.
There are two parties who must be identified when preparing the documentation for an SMSF. Both of these parties must be legal entities. A legal entity may be one or more individuals, a company or an incorporated association. The individuals must be over the age of 18 years, not bankrupt nor subject to any other legal or mental disability.
- The trustee, whose role is to:
- hold the assets of the trust in its name
- administer the trust, investing the trust funds and keeping its records
- distribute trust income, pensions and capital to the members.
- The members – the members generally have the right to remove and appoint the trustee and whose consent is a necessary pre-requisite to any changes to be made to the trust deed. Special rules permit a minor to be a member.
It is vital that the trustee of the SMSF is determined by reference to the membership of the SMSF in order to qualify as a regulated superannuation fund and, thus, be entitled to the concessional taxation rate of 15%. In order to qualify, the rules relating to the choice of trustee are:
- For a sole member fund, the trustee must be one of three options:
- the sole member with another suitable individual
- a company, the sole director of which is the sole member
- a company with two directors, one being the sole member; the other being a suitable individual.
- For a fund with 2 to 6 members, the trustee must be one of two options:
- all members must be trustees
- a company, the directors of which are all the members.
A suitable individual is a person who is not the employer of the member, unless that person is a family member of that member.
Special rules apply where a member is a minor or subject to certain legal disabilities.
The trust deed sets out the terms of the relationship between the trustee and the members. It can be used to dictate a variety of procedures or mechanisms in terms of the discharge of the trustee’s duty to the members.